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GST

GST - Goods and Services Tax

Last Updated 25th Jul 2021

Central Taxes State Taxes
Excise duty Value Added Tax (VAT)
Service tax Entry tax and octroi
Additional customs duty or Countervailing Duty (CVD) Luxury tax
Special additional custom duty Purchase tax
Central surcharges and cesses Taxes on lottery, gambling etc. State surcharges and cesses
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What is GST?

GST is a new form of tax that seeks to replace all central and state taxes and levies such as excise duty, countervailing duty, service tax, value added tax, octroi, entry tax and luxury tax. Goods and services should be taxed based on the value addition at each stage and not based on the gross value of the goods or services billed at each stage. Further, tax should be eventually borne at the point of consumption rather than at the point of production, though the tax department must be able to track value addition at each step and collect tax proportionate to the value added at each stage.

GST is a single tax right from the manufacturer or service provider to the consumer. In this system, taxes paid at each stage will be credited in the subsequent stage of value addition. Thus, Goods and Services Tax charged by the final dealer (seller or service provider) is the final tax borne by the customer, with set off of all taxes paid at all earlier stages in the supply chain.

Journey of GST in India

  • It will be levied on all goods and services produced or supplied or imported in India.
  • Exports are not subjected to Goods and Services Tax.
  • Goods that are kept outside its purview include alcohol for human consumption, petroleum products such as crude oil, petrol, motor spirit, high speed diesel, natural gas, turbine fuel and electricity.

Difference between GST Tax and Old Tax Structure

Old Tax Structure GST Tax
Number of Laws There are separate laws for separate taxes and respective VAT on states There is only ONE law
Tax Rate Existence of separate tax rates There will be one CGST rate and uniform SGST rate across all the states
Cascading effect (Taxes on Tax) Presence of cascading effect of taxes due to multiplicity in taxes Cascading effect is reduced which makes it very simple
Tax Burden High tax burden on taxpayers Tax burden is much reduced
Tax Structure Presence of multiple taxes makes compliance difficult Subsuming or absorbing the taxes into one makes compliance simple and easy
Prices for Consumers Usually very high due to cascading effect of taxes Prices are expected to be reduced

GST Exemptions

Old Tax Structure GST Structure
Goods
Food (essential unprocessed foods such as cereals, edible oil, vegetable, pulses) Exempt Exempt
Clothing Low rate Low rate
Medicines Low rate Low rate
Gold and precious metals (gems and jewelry) Centre: exempt; States: low rate (1%) Very low rate (2-6%)
Power Centre: Exempt; State: Subject to Electricity Duty Excluded i.e. State taxes will be continued
Alcohol High demerit rate (states only) Excluded i.e. State taxes will be continued
Tobacco High demerit rate Excluded i.e. Central and State taxes will be levied separately
Luxury cars High demerit rate High demerit rate
Aerated beverages High demerit rate High demerit rate
Petroleum High demerit rate Exempt for now, present tax will be continued till the time decide by GST COUNCIL
Real estate land Exempt Exempt
Services
Education Exempt Exempt
Health (excluding medicines) Exempt Exempt

Advantages of GST

For Manufacturers and Traders

  • Easy compliance
  • Uniformity in tax rates and structure
  • Removal of cascading or compounding effect of tax
  • Enhance the competitiveness
  • Move towards development of a common national market

For Central and State government

  • Simple and easy administration
  • Improved compliance and revenue collections
  • Better revenue effectiveness

For Consumers

  • Payment of the single and transparent tax
  • Reduction of burden of the taxpayers

Tax Laws before GST

  • Before GST in India, the Taxation system was divided into direct and indirect taxes. The direct tax included Income and Wealth Tax, and the Indirect tax included Sales Tax, Excise Duty, Customs Duty, and Service Tax.
  • The indirect tax was imposed on one person; the burden of it, however, was imposed on another person. In the direct tax, the burden was imposed on the taxpayer directly.
  • The tax was collected by the State and the Center separately, also, different states had different tax regimes.

What changes does GST bring in?

The Goods and Services Tax or GST brought a major change in the taxation visuals in India. Earlier, different taxes were paid separately to the state and the center. However, GSTin subsumed all taxes into one, and now there is the practical application of ‘One nation, one tax.’ Some of the changes that GST brought in are as follows:

  • No multiple taxes to be paid
  • Replacement of indirect taxes like excise duty and sales tax into one
  • Clear distinction of taxes on luxuries and necessities
  • Introduction of simplified ways to fill Income Tax Returns and taxes, for instance through GST online portal or website
  • Boost for Real estate and MSME sector
  • Ease for transportation of goods, as no separate taxes
  • Tax administration under both State and Central governments
  • Transparency in the taxation process

Latest Budget 2021 Highlights

  • FM proposes a rise in capital expenditure by 34.5%
    Finance Minister Nirmala Sitaraman proposes a capital expenditure for Rs 5.54 trillion in the financial year 2021-2022. Last year the capital expenditure was estimated at Rs 4.12 trillion.

FAQs

What do you mean by GST?

GST or Goods and Services Tax is an indirect tax, charged on the consumption and supply of goods and services in India. The Government collects GST from the ultimate point of consumption.

What is GST and types of GST?

GST is the Goods and Services Tax that is collected by the Government on various goods and services. It is distinguished into four types, which are IGST, CGST, SGST, and UGST.

What are the three types of GST?

The three types of GST are CGST or Central Goods and Services Tax, SGST or State Goods and Services Tax, IGST or Integrated Goods Services Tax, and UGST or Union Goods and Services Tax.

Who collects IGST?

IGST or Integrated Goods and Services Tax is collected by both Central and the State Government as per the prefixed revenues. This GST bill is collected in case of inter-state transactions.

Can I pay the GST bill online?

Yes, you can pay the GST bill online through GST official website.


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Our News - Jul 2021
  • 2021-06-23 : GST compensation cess: Govt may borrow Rs 1.58 lakh cr to pass on to States
    The compensation cess was introduced as relief for states for the loss of revenues. As per the Finance Ministers statement, a special session will be conducted to discuss modalities of the GST compensation cess such as collection, distribution, and time limit.
  • 2021-03-02 : GST crosses Rs. 1.1 lakh cr-mark for third straight month
    GST collections for February crossed Rs. 1.1 lakh crore for the third consecutive month.The gross GST revenue collected in the month of February 2021 is Rs. 1,13,143 crore. The increase in GST collection is an indication of economic recovery of the country post the pandemic.
  • 2021-02-18 : Government tightened GST registration rules
    Government made GST rules stringent. According to the new rules non-compliance will result in the cancellation of a taxpayer’s GST registration. The primary aim of the move is to curtail fraudulent business practices and the wrongful availing of the input tax credit by businesses.
  • 2021-01-01 : Deadlines extended for filing GST
    The government extended the due dates for indirect tax compliance, the government has extended the date for filing annual returns under GST for the financial year 2019-20 to February 28 from the previous deadline of December 31.
  • 2020-12-02 : GST collections for November top ₹1 trillion
    GST revenue scaled ₹1 trillion for the second consecutive month in November, after a sharp decline in the initial months due to the pandemic and the subsequent nationwide lockdown. The government notified that GST collections increased by 1.4% on a year-on-year basis. Out of the ₹1.05 trillion revenue collected, central GST was ₹19,189 crore, state GST was ₹ 25,540 crore, IGST ₹ 51,992 crores and cess ₹8,242 crores.
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